Target Costing Portland Equipment Company wants to develop a new log-splitting machine for rural homeowners. Market research has determined that the company could sell 6,000 log-splitting machines per year at a retail price of $850 each. An independent catalog company would handle sales for an annual fee of $6,000 plus $59 per unit sold. The cost of the raw materials required to produce the log-splitting machines amounts to $95 per unit. If company management desires a return equal to 10 percent of the final selling price, what is the target conversion and administrative cost per unit? Round answer to the nearest cent.

Question

Business

Tabby

27 November, 04:11

Target Costing Portland Equipment Company wants to develop a new log-splitting machine for rural homeowners. Market research has determined that the company could sell 6,000 log-splitting machines per year at a retail price of $850 each. An independent catalog company would handle sales for an annual fee of $6,000 plus $59 per unit sold. The cost of the raw materials required to produce the log-splitting machines amounts to $95 per unit. If company management desires a return equal to 10 percent of the final selling price, what is the target conversion and administrative cost per unit? Round answer to the nearest cent.

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Answers (1)

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Payton Buck · Answer 1

Answer:S 610

Explanation:

To get a return of 10% of sales price is to have a profit of S85 which is 10% of S850.

Handling cost per unit S6000/6000 unit=S1

Other handling cost per unit S59

Raw materials per unit=S95

Target conversations and administrative cost is

850-X-60-95=85

850-X-155=85

-X=85+155-850

-X=-610

X=610